Jerome Powell’s November 5, 2020 Press Conference – Notable Aspects

On Thursday, November 5, 2020 FOMC Chairman Jerome Powell gave his scheduled November 2020 FOMC Press Conference. (link of video and related materials)

Below are Jerome Powell’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript.  These comments are excerpted from the “Transcript of Chairman Powell’s Press Conference“ (preliminary)(pdf) of November 5, 2020, with the accompanying “FOMC Statement.”

Excerpts from Chairman Powell’s opening comments:

Economic activity has continued to recover from its depressed second-quarter level.  The reopening of the economy led to a rapid rebound in activity, and real GDP rose at an annual rate of 33 percent in the third quarter.  In recent months, however, the pace of improvement has moderated.  Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level.  In contrast, spending on services remains low, largely due to ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality.  The overall rebound in household spending owes in part to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals.  The housing sector has fully recovered from the downturn, supported in part by low mortgage interest rates.  Business investment has also picked up.  Even so, overall economic activity remains well below its level before the pandemic and the path ahead remains highly uncertain.  

In the labor market, roughly half of the 22 million jobs that were lost in March and April have been regained as many people were able to return to work.  As with overall economic activity, the pace of improvement in the labor market has moderated.  The unemployment rate declined over the past five months but remained elevated at 7.9 percent as of September.  Although we welcome this progress, we will not lose sight of the millions of Americans who remain out of work.  The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit.  In particular, the high level of joblessness has been especially severe for lower-wage workers in the services sector, for women, and for African Americans and Hispanics.  The economic dislocation has upended many lives and created great uncertainty about the future.


As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend in large part on the success of efforts to keep the virus in check.  The recent rise in new COVID-19 cases, both here in the United States and abroad, is particularly concerning.  All of us have a role to play in our nation’s response to the pandemic.  Following the advice of public health professionals to keep appropriate social distances and to wear masks in public will help get the economy back to full strength.  A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.  

Excerpts of Jerome Powell’s responses as indicated to various questions:

MARTIN CRUTSINGER.  Thank you. Could you talk a little bit about where you think the stimulus package that is being debated in Congress is and how severe a threat that could be to the economy if it does not get passed, say, before January.

CHAIR POWELL.  So it is — obviously, it’s for Congress to decide the timing size and components of further fiscal support for the economy, and I will say that the support provided by the CARES Act was absolutely essential in supporting the recovery that we’ve seen so far, which has generally exceeded expectations. And I do think it’s likely that further support is likely to be needed for monetary policy. And fiscal policy, I just mentioned the two risks that I think we face, and those would be well-addressed through more fiscal policy. One is the further spread of the virus, and the other is the lapsing of the CARES Act benefits and the savings on people’s balance sheets that will dwindle. But I — you know, I think it’s appropriate for us not to try to prescribe for Congress exactly what they should do or what the timing of it should be or what the size of it should be and leave it at that. 

NICK TIMIRAOS.  Thanks, Chair Powell. Nick Timiraos at the Wall Street Journal. To follow on Marty’s question, you really have been saying since April that more is needed on the fiscal policy front, and yet we don’t seem to be that much closer than we were in the spring or the summer to additional spending. Two questions: Would the lack of fiscal support compel the Fed to provide additional accommodation, and are you and your colleagues being more vocal about the need for fiscal support because the capacity for monetary policy to support growth is diminished here, given the low level of short- and long-term rates. Thank you.

CHAIR POWELL. So on your first question, you know, we’ll take into account all external factors and do what we think we need to do with the tools that we have to pursue our goals. That’s what we will do. And I’ve said it on a couple of occasions that that will go better and move more quickly if we have a broad set of policies from across the government. And we’ve said this in the very beginning. It’s really first and foremost healthcare policy, getting the — getting the spread of the virus under control and working on therapeutics and vaccines and that kind of thing, getting — so those are absolutely critical to the economy. Those are important as well as health policies, they’re going to be critical to the economy. Fiscal policy can do what we can, which is to replace lost incomes for people who are out of work through no fault of their own. And then what we can do is we can obviously support financial stability through our lending programs, and we can support demand through interest rates and asset purchases and that sort of thing. So we’re going to take the economy as it comes, including all external factors. So I think all of us lived through the experience of the — of the years after the global financial crisis. And for a number of years, there in the middle of the recovery, fiscal policy was pretty tight. And I think I just would say that I think we’ll have a stronger recovery if we can just get at least some more fiscal support when it’s appropriate, you know, when it’s appropriate and the size Congress thinks it’s appropriate. I do think that that will likely — and, by the way, you see, you know, a lot of discussion on both sides of the aisle, on both sides of the Hill that suggests generally that there will be something.

STEVE LIESMAN. Thank you. Mr. Chairman, also to follow up on sort of what Nick was talking about, two questions about quantitative easing. The first is, if the market is functioning better as you and other Fed officials have said, and QE right now is designed for smooth market functioning, why haven’t you reduced QE that you’re doing if the market is functioning better already? The second question I have is, what good for the broader economy would additional QE do at this point, given that interest rates are already low and don’t seem to be rising even above 1 percent? Thank you.

CHAIR POWELL.  So on the first — the first question, it’s — our asset purchases are serving both purchases, both — sorry, both purposes, financial market function and support for economic activity. So — and that’s really been true — I think in the very beginning of the crisis, the main focus was, obviously, financial market function, particularly in, you know, some of the major markets. But after that period we’ve understood all along that our purchases are also supporting economic activity, and that’s important. And that need hasn’t dwindled at all. So we haven’t looked at reducing purchases. So in terms of what they can do, first I would just say the purchases that we have in place are providing strong support to economic activity still. And, by the way, they’re sustaining the gains we’ve made in financial stability. You know, we don’t — we don’t take anything for granted. We don’t expect that things will deteriorate. But, nonetheless, we have a habit of keeping things in place for a while. So we’re not taking our gains in financial market function for granted, although admittedly they’ve been very large. So the asset purchases are just another very important piece of the accommodative policy stance that we have. And, you know, as you know, these, we’re buying 120 billion a month. That’s 1.44 trillion, if I remember my times tables. And it’s just providing a lot of support for economic activity and, by the way, removing just about the same amount of duration risk from private hands as QE3 did. So this is a big program, and it’s doing a lot of good. And we also — today, you know, we had a full discussion of the options around quantitative ease — not quantitative easing, the asset purchase program and, you know, we understand the ways in which we can adjust the parameters of it to deliver more accommodation if it turns out to be appropriate. Right now, we think that this very large effective program is delivering about the right amount of accommodation and support for the markets, and so it continues.


DAVID GURA.  IMF Chief Economist Gita Gopinath wrote a piece this week in which she said, unequivocally, we’re in a global liquidity trap and talked about the limits of monetary policy right now. She said, fiscal policy will need to be the main game in town. And it’s been a busy week. I don’t know if you were able to pick up the pink paper and read that piece, but she does say 97 percent of advanced economies have rates below 1 percent. And I just wonder if you’d agree with her in principle, that we are in a global liquidity trap and what the consequences of that would be. We’ve talked a lot about fiscal policy here domestically, and she talks about the need for sort of a global cohesive approach to fiscal policy. My second question is you talk about how you follow the epidemiology. You’re looking

[ Skipping and audio breaking up].

And I wanted to ask you about how you look at [skip] Christine Lagarde laying out what the ECB plans to do. As you lent an ear to what she had to say, the dire warnings that she was making this morning as she looks at the situation that Europe’s in, what can you and your colleagues learn about the second wave or the third wave that you’ve talked about and we’ve all feared when it comes to a policy response?

CHAIR POWELL.  Okay. Thanks. So two questions. First, I take the sense of your first question to be is monetary policy out of power or out of ammo, and the answer to that would be no, I don’t think that. I think — I think that we are strongly committed to using these powerful tools that we have to support the economy during this difficult time for as long as needed, and no one should have any doubt about that. And we do not doubt the power of the things that we’ve already done or the things that we may do in the future. I do think there’s more that can be done. I also think if you look at the stock of assets that we’ve bought, if you look at the facilities and the way we’ve been able to keep accommodated financial — financial conditions accommodative, I think we’ve been able to do a lot of things that are providing very strong support for the economy. And we’re going to — we’re going to keep at that. I’ve said — we’ve said from the very beginning, though, that this particular — this particular situation we find ourselves in is one where there is a sudden loss of income on the part of millions and tens of millions of people. It’s not so much a typical recession where demand weakens, the Fed cuts interest rates, interest rates stimulate demand, and the economy recovers. It’s a sudden shock where tens of millions of people are out of work. And the fiscal response was frankly, I think, very good and very robust in the United States. And it’s certainly one of the main reasons why the recovery has been as good as it’s been so far. So I do think fiscal policy is absolutely essential here. You know, stimulating aggregate demand is one thing. But where there’s a part of the economy that kind of will be resistant to that, you also need fiscal policy. And, of course, you need healthcare policy too. I didn’t see Madame Lagarde’s comments this morning, but I took the sense of that question to be the spread of the disease in Europe and what do we think about that? Yeah. So as I mentioned in my — in my opening remarks, it’s a concern. We have a widespread spike in cases across the country, more in some regions than others. And even if we don’t have — and I don’t expect that we would — sort of government imposed restrictions, it does seem likely, though, that people who have maybe begun to engage in activities that they had in flying, staying in a hotel, going to restaurants, going to bars and things like that, that they may pull back in a situation where suddenly the cases are everywhere in your city, your state, your community. So I do think that that’s a risk that we have as we go into the fall now and the cases spike. That could weigh on economic activity. One would expect that it would. We thought the same thing, in fairness, about the wave we had this summer in the South and the West. And the economy, you know, seemed to move right through that. This one seems to be larger and more widespread. In any case, it’s a risk is what I would characterize it. I would characterize it as a risk as I did in my — in my comments.


HOWARD SCHNEIDER.  From Gina’s question, have you gotten a commitment from Secretary Mnuchin to extend the 13(3) facilities if you decide it’s necessary, and are you concerned what a lame duck Trump administration might do in that regard?  And then, more broadly, on the state of the economy, are you comfortable now that the tail risk for worst-case outcomes has been kind of swept aside and minimized at this point, are we down, in other words, to kind of household-level problems among a large set of households perhaps but that the financial crisis, double-dip recession sort of scenarios are off the table?

CHAIR POWELL.  So on your first question, we really are just turning this issue now; and we have not made any decisions.  We are just getting started on it, and it’s a decision that we’ll make jointly with the Treasury Department. And that’s really all I can say today. That’s all I have for you on that today. In terms of the tail risks, I mean, I think clearly the tail risks that we were worried about have subsided. And, you know, we were worried about very negative potential outcomes. And that—you know, that’s what is to be expected of us is to think about how things can go wrong as well as the way things that can go right.  But we have to—we do make policy from a risk management standpoint.  We don’t just look at the most likely case. We ask how do you make policy in light of the risks, and often its downside risks in a situation like this.  I would not say that anybody’s feeling comfortable about this, though. You know, we’ve gotten through the first five, six months of the expansion better than expected, but we do see in Europe. You look at—look what’s happening in Europe.  Look what’s happening here, another spike in cases as the cold weather arrives and people are inside more. So I think we have to be humble about where we are relative to this disease. It hasn’t gone away. Clearly, you know, therapeutics are advancing. Research on vaccines are advancing. Death rates are way down. Hospitalization rates are lower now. But—so we’re learning.  But, I mean, we are so—we’re very far from saying that we think we’ve got this and eliminated the tail risks.  But I think clearly the tail risks have diminished since—at least our perception of them has diminished since earlier in the year.



The Special Note summarizes my overall thoughts about our economic situation

SPX at 3508.46 as this post is written